“Shrinkflation” in your shopping basket spells problems for the supply chain

Examples of “shrinkflation”, in which products reduce in size but stay the same price or even get more expensive, are becoming more familiar in the Food & Beverage as well as Retail sectors

A recent study published in The Grocer has found Tesco reduced the size of its ready meals while also increasing the price of them. Tesco is not alone in being guilty of “shrinkflation’” with other popular brands taking similar measures. It follows Morrisons, who earlier this year cut its own-brand curry range, knocking 50g off the size of the product while increasing the price by 74p, reported by The Mirror.

Similarly, laundry products such as Fairy, Bold and Lenor have all been cut down in size, according to The Grocer. Mars cited ‘rising costs of raw materials and operations’ when it controversially shrank the size of a Maltesers sharing bag and Twix multipack.

The most recent shrinkflation example to add to the list is Dove. The Unilever brand’s 100g Beauty Bars have been replaced with smaller 90g bars in the supermarkets – but prices have stayed the same or risen. 

In response, Unilever said the fmcg giant was “currently experiencing increases in the costs of some of the raw materials that go into our Dove beauty bar”.

“When this happens, we will always try to mitigate cost increases as best we can while continuing to maintain high-quality ingredients. 

In this instance, Unilever had reduced the size of the product “to bring it in line with other markets”, she said. It comes after The Grocer last month revealed Unilever had shrunk its Magnum multipacks in a bid to mitigate soaring costs.

To Good Business Pays, “shrinkflation” is another signal that all is not well in the supply chain. The combination of price pressure, operating costs and the hot summer are making for a tough time for small suppliers in the food chain. 

As you can see from the chart below, where we have (with the help of EY Parthenon) mapped out the average time to pay invoices for all sectors, the Food & Beverage sector is one of the worst of the worst. With an average payment time of 45 days – there are many examples of much longer standard payment terms which, with the current pressures, will kill many small businesses off. 

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The Retail sector doesn’t do much better, averaging 37 days to pay invoices they are in the bottom half of the payment league. When you buy your groceries at the till, you pay immediately. So why do their suppliers need to wait for 37 plus days to get paid for their products? 

Payment terms and payment times are a matter of choice for companies. Good Business Pays publishes the payment performance data for all reporting companies on our website. If you are interested in the Food & Beverage market you can find a list of all reporting companies in that sector here: Food and Beverage Industries – Good Business Pays

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